Natural gas is one of the most important energy sources on Earth, providing more than one-fifth of the planet’s energy generation each year, behind only oil and coal.

Australia, with substantial offshore natural gas reserves, has become a major player in liquified natural gas (LNG) exports over the past decade, more than doubling its output since 2004. In 2016, the country exported 44.3 million tonnes of LNG, putting it second in global market share with 17.2% of the total.

This has had an adverse effect on the Australian electricity market as some power stations burn the gas to drive the electricity turbines. ‘Gas is used to augment other supplies at times of peak demand, meaning that although most electricity is supplied by coal, it is the price of gas-fired power that determines the final price when prices climb’ (Source: SMH Jul-17).

As of May 2017, “The Federal Government has decided to impose export restrictions on gas in a bid to ensure there are no domestic shortages. By July 1 (2017), it intends to regulate so that it could force producers to boost supply for Australian users before they are allowed to export. Resources Minister Matt Canavan said intervening in the market was aimed at protecting thousands of manufacturing jobs threatened by unreliable supply and high prices.” The new government regulations were to restrict gas exports from January 1st, 2018.

To date, the Australian Government has not had to resort to the formal gas export restrictions proposed in 2017, they have instead reached an agreement with the gas industry that sufficient gas would be made available at reasonable prices. Since signing the Heads of Agreement in October last year, LNG exporters have announced contracts to provide substantial volumes of additional gas to domestic buyers in 2018.

More recently, the Australian Government announced that it expects liquefied natural gas (LNG) exports to climb to 76.5 million tonnes in the year to end-June 2019.

National Market Outlook

The culmination of the increased Renewable Energy Target, the National Energy Guarantee, rising coal and gas prices and reduced availability of cheap energy generation have ultimately led to a significant rise in future power prices. Large consumers currently on energy contracts secured before March-2017 are advised to factor in significant increases in their annual energy budgets moving forward.